The 4th edition of Dungeons & Dragons is a game which is significantly different from earlier editions of D&D. And with the "5th" edition of D&D Next going back to how the game was before 4th edition, Wizard of the Coast will end up with two very distinctive and separate groups of customers: Those who hated 4th edition, didn't buy it, kept playing 3.5, and who are now all cheering and probably will be buying D&D Next. And another group who loved 4th edition, and who won't be buying D&D Next, because it isn't the tactical game they want. If D&D Next succeeds to bring back the customers WotC lost with 4th edition, it only does so by losing them the customers they gained with 4th edition.

In hindsight I think the problem was calling 4E just "Dungeons & Dragons", implying that it was the same game, just further "patched". It would have been better if they had called it "Dungeons & Dragons Tactics", to indicate that it is in fact a somewhat different game, with a lot more focus on tactical combat. They could have then accorded the title of the official "Dungeons & Dragons" to the game now being called D&D Next.

Making 4th edition was a bold move. It took a very traditional brand and changed it into something very different. People react negatively not because 4E is a bad game, but because they just don't recognize it as being D&D any more. If 4E had carried another name and not claimed to be the one and only Dungeons & Dragons, maybe we could have avoided the edition wars. Now Wizards of the Coast is getting cold feet and trying to reverse course, getting back to a more traditional game. Which in itself again is not a bad game, but now you get the people who think 4E is "Dungeons & Dragons" shouting that D&D Next is not the Dungeons & Dragons they know.

I really think "Dungeons & Dragons Tactics" would have been a better name for 4th edition to avoid this split of the customer base.

This has been the case with D&D since the beginning. There were Red Box holdouts, 2E holdouts, and so on and so forth.

The biggest problem with D&D as a franchise is the "payment model" so to speak. Once you buy the books, you have them. The only reason to "upgrade" to a new edition is the people you are playing with want to as well. It is not like standard videogames where the graphics start to look pixilated or the gameplay gets boring. Hell, you could have campaign after campaign without a single combat at all.

WotC is a business though, so they need to keep selling books that you don't really need, putting them in an awkward position of redefining the game every few years. I guess it's still working, but... for who knows how long.

"People react negatively not because 4E is a bad game, but because they just don't recognize it as being D&D any more."

In my case this is right on the money. I bought a slew of the 4th ed stuff and we gave it a serious go, but in the end it was too much of a break for me. Pathfinder was perfectly positioned to capture my interest.

WotC's increasing emphasis on their tactical boardgames over the past couple of years seems to indicate they agree with your assessment. These games use mechanics very much like 4th edition, and they work great! WotC seemed to want to move closer to a boardgame/not-quite D&D sort of product.

But now it's almost as if they panicked and rushed into something crazy. Perhaps Hasbro demanded a grand gesture or something.

In response to Azuriel I think WotC tried to address this with subscription fees for DDI. The Compendium was genuinely useful and the original (offline) Character Builder was reasonably good. I've spent approximately as much on DDI as I did on books.

Unfortunately their other tools never really impressed and the new (online) Character Builder is a horrible mess of incompatibilities, inconsistencies and bugs.

The world has changed enormously since the first few decades of roleplaying games. WotC would do well to give away the Player's Handbook for free as a PDF to grow the player base and then make their money on DDI subscriptions that gave players access to really excellent tools and modular content.